What is the price of the following zero coupon bonds if interest rates are (a) 4 percent,
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What is the price of the following zero coupon bonds if interest rates are
(a) 4 percent,
(b) 7 percent, and
(c) 10 percent?
• Bond A: zero coupon; maturity 5 years
• Bond B: zero coupon; maturity 10 years
• Bond C: zero coupon; maturity 20 years What generalization can be made concerning the term of a zero coupon bond and its price in relation to changes in the level of interest rates?
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